Dividend.com

by CI Staff

Dividend.com is a reasonably comprehensive dividend-oriented website that does everything from educating investors to providing stock recommendations and a dividend stock screener. Investors can use the website to search for securities with characteristics such as high yields, a long history of raising their dividend or an upcoming ex-dividend date. Searches can include common and preferred stocks, ETFs, REITs, MLPs and foreign companies with ADRs.

At first, the website appears to offer a considerable number of features, but upon closer inspection, they mostly revolve around DARS (Dividend Advantage Rating System) ratings. Dividend.com uses this proprietary rating system to find strong and reliable companies, which may be useful when comparing high-yielding stocks.

A DARS rating comprises five factors: relative strength, overall yield attractiveness, dividend reliability, dividend uptrend, and earnings growth. Each factor is ranked on a five-point scale and used to determine a security’s overall rating. Users can screen by DARS composite rating or by the rating’s individual components. When analyzing a particular security, its DARS rating is broken down so users can spot the investment’s strengths and weaknesses with slightly greater precision. For Dividend.com to recommend a security and place it on the Best Dividend Stocks List, it must have a DARS rating of 3.5 or higher.

If the website were entirely free, it would be a decent addition to any dividend investor’s research. As it is, premium membership is $149 per year, which some may argue is too expensive. The user is paying primarily for the convenience of having Dividend.com apply a formula to identify strong dividend-paying companies. This is not necessarily the best method for every investor, and there are plenty of free alternatives, such as the “Dogs of the Dow” approach.

Moreover, DARS ratings may not be the best tool as they follow one method of investing and are slightly difficult to interpret. The rating attempts to predict expected price growth as well as dividend payments, but users are not told specifically how that is calculated, which means they cannot be sure if the rating matches their preferred method of investing.

Also, the technical aspects of the DARS rating may underrate the potential of a value stock. For instance, at the time of writing, Halliburton Co. (HAL) had a 3.0 overall DARS rating and 2.5 for relative strength because it had been slightly underperforming the market. However, historical performance is not necessarily the best predictor of the future, as evidenced by the relative upswing in articles discussing the possibility of Halliburton as a value play.

Nevertheless, Dividend.com has something for every dividend investor. For instance, when comparing similar dividend-paying companies, an investor could use Dividend.com to see if any have an upcoming ex-dividend date that they could get in on.

The website also makes it easy to construct a portfolio by separating stocks into a variety of categories, such as by sector, or by generating sample portfolios.

Dividend-oriented investors may find Dividend.com well worth their time, but they should keep in mind that there are potentially more cost-effective methods of generating similar, if not better, results.

Discussion

Peter A from WA posted over 3 years ago:

I've used dividend.com for over a year. It has improved significantly. I find it useful, but not so sure that it's really worth $150 or so a year. So far, it has helped make enough money that I'll continue to use it.

Buy my use is merely to generate a list of quality stocks, from which I generate a 100 day price target based on the probability of touching (price variance based). My system buys the best of these (10 factos) and sells automatically when the price target is reached.

My main criticisms of dividend.com:
1. The owners are sure that their "system" is a good one;
2. DARS (as noted in the article above) is a proprietary quality measure. As such, it is hard to verify it historcally. AND worse, for me, it is a combination of a number of factors. I do my own inertia testing and would leave that out.
3. DARS does not have enough "discrimination" Most stocks are in the 3.0 to 3.4 range, with lots 3.3 or 3.4. I'd like to see a scale of 0 to 10 with relatively few at each level so I could weed out those I'm not interested in. In fairness, you CAN do that yourself with the screener.
4. The measure is to agglomerated. Perhaps the algorythm that combines the 5 components could be described, and the five components reported. I could then create my own weightings.

With all this, it is a useful service that has, so far, helped me make money with my TtP-S system.

Pete A

Bob Wabler from CA posted over 3 years ago:

I totally disagree with the author of this article - this person must be a working for AAII.
I am a member of Dividend.com and have enjoyed the service of Dividend.com. I have bought 8 sizeable positions using their DARS recommendations. Since January 1, 2012 through July 17,2012, I have gained 13.0% YTD which is 20.7% on an annualized basis. The author talks about Dogs of the Dow - which is only 9.5% YTD ( as of 7/17/12 ) and 1.4 % since inception! This is a problem with this website - the portfolios do not work!!!

Joe Lan from IL posted over 3 years ago:

Hi Bob,

Thanks for your comments. We are simply stating our opinions as to the strengths and weaknesses of the website and providing alternatives. Your return this year has been admirable but over the course of long-term investing, 7 months is a very short sample size. We brought up Dogs of the Dow as an example. We did not say it was better or worse, simply an alternative. As a matter of fact, it is one of our weakest performing screens (it is not a portfolio), ranked 70 out of 75 since inception.

Most of our screens have very good price performance histories and our portfolios with long term histories have done very well.